Whoa! What Just Happened to My Stock?

Resist the urge to high-five everyone in the cubicles next to you. Your stock may have just strapped on a rocket pack and taken off for the moon, but smart investors won't celebrate until they know that upward leap was justified. Without a fundamental basis for the bounce, these stocks can quickly make the return trip down.

Is now the time to lock in profits, or is this just the first step toward even higher valuations down the road? Let's examine several stocks that just hit the afterburners and see whether they're truly headed into orbit.

On a day when the market had rallied almost 80 points higher but swung to a loss on the day -- and at one point was down 1.5% peak to trough -- even a high-flying blue chip can look like a volatile penny stock.

The devil's in the details
Surprising strength in retail sales coupled with third-quarter guidance being boosted helped propel Zumiez higher yesterday. Last quarter, it was able to post a 9% increase in same-store sales, and in raising its third-quarter earnings guidance to $0.25 to $0.27 a share (from a prior range of $0.21 to $0.24 a share), the sneaker seller said comps over the first two weeks of September were up 15% year over year. While it expects third-quarter comps to come in around the mid-single-digit area, the better-than-expected results will push full-year comps to the high-single-digit range.

That kind of strong showing yesterday ahead of Volcom, Pacific Sunwear, and even Nike (NYSE: NKE) shows why 93% of the more than 800 CAPS members rating Zumiez believe it will continue posting market-beating results.

Valence Technology was also once again one of the big movers. Last week, the lithium battery maker spiked higher on supposedly no news, as the sector seemed decidedly mixed. However, PepsiCo (NYSE: PEP) subsidiary Frito-Lay had put in a large order (176 trucks) to Smith Electric Vehicles, one of Valence's biggest customers, for its electric delivery trucks. Second only to Segway, Smith accounted for 12% of 2010 revenues and is considering going public next year. And the next day, Valence announced a deal worth as much as $24 million over six years to supply a U.K.-based hybrid public bus company with batteries.

Yesterday's move higher was probably the result of analysts at Needham & Co. reiterating their buy rating on the battery maker, though other battery makers like Altair Nanotechnologies and A123 Systems (Nasdaq: AONE) were also higher. Advanced Battery Technologies (Nasdaq: ABAT) bucked the industry once again and fell.

Needham looked at the Fritos deal and the agreement with the U.K. bus company and said it wouldn't be surprised if there were more such supply deals to come. Despite the supposed supply glut, Valence Technology has been showing the industry the way up.

CAPS member whomonkyoulus only needed to take a look at how one insider was buying the stock to think its ability to improve its cash flows would continue. A director recently made a market purchase of more than 7 million shares, a seemingly bullish sentiment if there was one. As Peter Lynch has noted, there are many reasons insiders sell their stock, but usually only one reason they buy them: They think the price is going higher. Since his purchase three weeks ago, Valence shares are 39% higher.

Making it to the old-age home
Maybe it was because Kroger posted some pretty strong results itself yesterday, but fading grocery store chain Great Atlantic & Pacific Tea Co., which last week said it was selling off seven of its stores, also had a big day.

Kroger said brand-name retailers were being more competitive on price to effectively take on private label brands, even the supermarket chain's own label. That gave them the ability to cut prices. Yet while a one-day jump in A&P's price might be nice, CAPS member stockfreak1 doesn't think it amounts to all that much in the long run:

Short this to 0. This company doesn't know how to run its business properly after over 135 years of being in business. Does this make sense? Shut down stores but pay new recruit Vice President executives @ 600,000 per year. With 1 billion in debt on it's books and not turning a profit this is heading for BK. The writing has been on the wall for several years now.

Going into orbit
Just because your stock has taken to the stratosphere doesn't mean it won't lose altitude. Markets are known for overreacting. A closer look at what's happened to your stock can give you an edge over other investors who merely follow the market's lead.

That's why it pays to start your own research on these stocks on Motley Fool CAPS, where you can read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made, all from the stock's CAPS page. Then you can decide for yourself whether your stock's headed for re-entry, or off to infinity and beyond.